Reputation and Aggregate Shocks

Julien Prat and Boyan Jovanovic ()
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Julien Prat: CREST

No 37, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: Investment in reputation responds positively to news shocks and to current aggregate shocks when they are autocorrelated. Idiosyncratic risk is contractionary and reduces the response to aggregate shocks. In this sense the rise in idiosyncratic risk can explain the great moderation -- the two have happened roughly at the same time. The greater cyclicality of durables can also be explained with this mechanism because durables have greater technological products and firms making them have more prove by exerting effort.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
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